COLUMN TAX
Tax season is right around the corner! As we get ready to open Column Tax for the 2023 tax filing season, many taxpayers might wonder what’s changed this year.
Some of the key tax changes for your 2023 taxes are typical: higher income tax brackets and an increased standard deduction. But other changes could impact you if you had a side hustle or earned freelance income last year. And, if you spent money on home energy efficiency in 2023, you might be eligible for certain tax credits.
Whether you want to maximize your refund, lower your tax bill, or just get ahead on planning, here are five of the biggest tax changes you need to know about for your 2023 return.
The IRS typically raises income tax brackets every year to keep up with inflation. If you made the same amount in 2023 that you did in 2022, you might find that you’ve fallen into a lower tax bracket. Here are the tax brackets for your 2023 tax return:
You can find the tax brackets for other filing statuses, such as heads of household, at the IRS website.
If you file a simple tax return and don’t need to itemize your deductions, you’ll likely save the most money by claiming the standard deduction. The standard deduction reduces your taxable income and has been increased to $13,850 for single filers in 2023, up $900 from 2022. If you’re married and filing your taxes jointly, the 2023 standard deduction has been increased to $27,700, up $1,800 from 2022.
In 2022, the IRS announced that it would roll out a new tax reporting requirement that would have third party payment apps like PayPal and Venmo report any earnings over $600 on tax form 1099-K. Prior to this announcement, only freelancers who received payments totalling over $20,000 per year (across more than 200 transactions) would receive a 1099-K.
The IRS has delayed this rule twice. If you earned self-employment income and were paid through third party payment sites, you’re still on the hook for paying taxes on your business income. But you likely won’t receive a 1099-K from the payment app in 2023. You may receive a 1099-NEC from the client you worked with.
If you bought a new energy efficient home in 2023 or made improvements to your residence, you might be eligible for two different tax breaks that can lower your tax liability.
The IRS offers an Energy Efficient Home Improvement Credit for up to 30% of a maximum of $1,200 spent on eligible energy property costs and home improvements (and up to $2,000 per year for qualifying heat pumps and biomass boilers or stoves). You may qualify for a credit (up to $150) if you had a home energy audit. You can find a full list of eligible improvements here.
The Residential Clean Energy Credit also offers a credit up to 26% of eligible solar, wind, geothermal, fuel cell, and battery storage purchases for your home. You’ll find the full list of eligible expenses here.
If you bought a new energy-efficient vehicle in 2023, you may be eligible for a tax break. Enacted under the Inflation Reduction Act of 2022, the Clean Vehicle Tax Credit offers up to $7,500 in tax credits when you purchase a new, clean vehicle. You’ll need to make sure your vehicle qualifies as an EV and meets all of the criteria to claim the credit in full. There’s also an income threshold: if you earned more than $150,000 in 2023 (single filers) or $300,000 (joint filers), you’re not eligible to claim this tax credit.
There were several tax changes made in 2023 that could end up impacting your tax bill or the size of your refund. The IRS has raised the 2023 income tax brackets and standard deductions, which could help reduce your taxable income and lower your tax bill.
If you earned any freelance income in 2023, you’ll need to report this on your tax return, but you likely won’t receive a 1099-K from payment apps unless you earned more than $20,000 across 200 or more transactions last year.
Lastly, if you’ve made an energy efficient purchase, like solar panels or a new EV, you may be eligible for additional tax breaks which can reduce your tax burden even more.
Every tax season brings new changes and, with them, ways to optimize your taxes. With 2023 taxes opening soon, we can't wait to kick off this tax season at Column Tax!
